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Some years ago, you could blow a Saturday (and your paycheck) by hopping around town visiting sprawling electronic chains like Circuit City, CompUSA, Best Buy, and Good Guys. Not anymore. Without getting deep acquisitions, bankruptcy filings, store closures, re-openings, and re-brandings, suffice to say you’re lucky to have one good electronics store within driving distance, and more often than not, that store is Best Buy. Unfortunately (or fortunately, if you’re not a fan of the franchise), Best Buy may not be long for this world. The sad fact is that big box retailers are a dying breed, and nearly everyone knows it. Everyone, that is, except for Richard Schulze, the billionaire founder of Best Buy.

You don’t typically amass billions of dollars by being foolhardy, but even a man of vision can sometimes be blinded by the light. That appears to be the case with Mr. Schulze who has a grand idea of buying out the company he founded with what amounts to a $10 billion proposal, and then proceeding to slash prices in order to compete with the likes of Amazon and other online e-tailers, The Wall Street Journal reports. Oh, and while he’s at it, Schulze wants to transform Best Buy into offering Apple-style customer service.

Can it be done?

There are several challenges that stand in the way of what Schulze wants to do, some more obvious than others. One of the biggest is convincing private equity firms that he’s not off his meds (if he takes any) and that this could actually work. Schulze doesn’t have $10 billion of his own money to see this thing through, and though it’s reported he plans to pony up $1 billion of his personal fortune, that still leaves a balance of $9 billion.

Assuming he’s able to come up with the money, and that Best Buy’s board is willing to approve the deal, Schulze then has to figure out how exactly he can cut costs to compete with online prices while still being able to pay the electric bills, leases, maintenance costs, wages, and everything else associated with running brick-and-mortar stores.

Best Buy is in the process of shutting stores and reducing floor space in others.

What Schulze wants to do is almost the exact opposite of what Best Buy is already in the process of doing. The electronics chain has put in motion an ambitious cost cutting plan that involves shutting dozens of superstores, shrinking several others, and reducing its overall workforce in an attempt to stop the bleeding (Best Buy posted a $1.2 billion loss during its last fiscal year).

“There is no question that now is the moment of truth for Best Buy and that immediate and substantial changes are needed for the company to return to its market-leading ways,” Schulze wrote in an unsolicited letter to Best Buy’s board. “After assessing all of my options, it is my strong belief that Best Buy’s best chance for renewed success is to implement with urgency the necessary changes as a private company.”

Damned if you do, damned if you don’t

Schulze shouldn’t be mocked for being ambitious, but his plan can (and certainly will) be criticized, scrutinized, and maybe even euthanized if the board rejects his proposal. Plain and simple, it’s cheaper to run a website and a spattering of warehouses than it is to stock and supply a brick-and-mortar chain with products and workers. Even if Amazon starts charging sales tax in all 50 states, it will still have a cost advantage over Best Buy.

This is where the Apple store experience comes into play. Forget any negative connotations you might have towards Geek Squad or Best Buy employees in general, because Schulze’s plan calls for a premium shopping experience at rock bottom prices. It’s Wal-mart meets Macy’s meets Willy Wonka on a foundation of razor thin profits (and several initial years of losses).

It’s hard to imagine Schulze’s grand vision playing out the way he sees it, and over time, those dwindling profits will likely serve as the wrench in his miraculous machine. On the flip side, Schulze is probably right that Best Buy’s current cost cutting measures mark the beginning of the end. Unfortunately, there just doesn’t appear to be an alternate destination for big box retailers, just different paths to the same point.

Tagged In

What I think would bring customers back is changing from the high-pressure “Move the stock” environment and mindset into a showroom that has rapid delivery from local warehouses for big-ticket items and a sliding scale of level of service the buyer can choose from.

Much of what has driven people away from BB in the first place is the staff with little knowledge of their stock harassing customers who just want to browse and being impossible to find when you do have a question, along with the massive lobotomy and ever-more ridiculous “services” of Geek Squad. The store got complacent and a pain to shop in as they lost all of their physical competitors, and they coasted for far too long on the fact that people want to see a thousand dollar item before buying it.

And their computer sales prep methods are so bad I actively tell my company’s clients (we do full-service support for small businesses) to not only avoid buying company machines there, but personal as well and go to either Microcenter or the MOA Microsoft store if they want to directly buy one.

BLToday

I haven’t gone back to Best Buy voluntarily since they implemented their “Angels/Demons” policy. I’m a “demon” so they didn’t want my business. But I have great influence on other people’s tech buying decision, therefore I haven’t sent any business to BB.

kevin johnson

Stupid shit-head. big box stores are only mildly shrinking and are not all dying like the greedy media claims to attract readers/viewers

Paul Lilly

Be sure to follow me on Twitter and Google+, I don’t get nearly enough of this type of inspiration!

PhilipNicolcev

Hahah

John Leighow

I wish this article was more accurate.. BBY posted a loss, of 1.5bln last year, but bought out their share of Carphone Warehouse for 4bln+, which allows them to keep ALL profits from Best Buy Mobile as opposed to how it originally was. Their gains this year, will show it.

Outside the US big box is still prominent, delivery systems for products from the US and even ‘in country’ are horrendous , sometimes costing more then the product. Big box still has a major role to play, just maybe not in the US.

fashionvalley

Anyone that has visited any BB, knows their staff are often twerps/constantly texing each other/know little to nothing about “most” of the products,etc,etc,etc and are NEVER around when you need a question answered…

BB is making Radio Shack look really good!

BB, ONLY if I need it faster than on-line will deliver!

Jon Austin

Whats funny is if you followed Circuit City and I did…worked there in the 90s as a kid there doing the exact same thing. Sales plumented stores were losing money. So they cut and cut. Failed. Moved everyone to hourly from comission..failed, tried new store lay outs … failed, ditched major appliances only to miss the housing boom of the the last decade..fail. Tried smaller mall stores .. failed

What theses senior citizens that run Corporate America do not realize is things have fundamentally changed. Amazon.com is a 100 billion dollar company for a reason. I could give a rats ass about your customer service…with Amazon I don’t get any..Ive never even talked to a human from that company. What I do get is virtually everything EVERYTHING at a price much less then just about anything that Best Buy carries and as a Amazon Prime member I get it in 2 days usually without fail.

I dont go to Best Buy for there awesome experience there is none to be had. Its staffed by part timer shitty help who know less about the product then my 60 year old father. I dont go there to consult there idiotic geek squad, I dont go there for anything one but one thing…window shopping and to look at my iPhone using my ebay or Amazon App. Thats it.

There so lost its stupid. While Best Buy tries to reinvent there stores thinking that is the future Amazon not only outsells anything they have 10 to 1 but they also handle a majority of the worlds Cloud Computing, E-Commerce and a whole host of things that have nothing remotely to do with a physical store.

Cya Best Buy, I wont miss you either when sometime this decade you join the long list of foolish companies in the dust bin of history.

It’s like watching a sinking ship, and the captain is ordering new deck chairs.

Michael Garrett

I thought Best Buy would have reformed after Circuit City and Tweeter went out of business. At least at CC, we would spend a lot of our time just talking with customers about the technology we loved and debating about features they wanted versus crap their tech guy at work told them they needed. I don’t get that same feeling of approachability with Geek Squad as I did with Firedog.

Big box is dying because electronics inventory ages so poorly. By the time the PCs make it to the showroom floor, they’re halfway obsolete. By the time the inventory is depleted, the equipment is selling for less than the stocking price. The only way big box retail for electronics can survive is through price stability – which Apple has established through its aggressive pricing schemes. Unfortunately for Best Buy, they won’t be able to freeze prices for other brands long enough to keep their inventory making money throughout its lifecycle. They’re going to have to cut inventory holdings to bare minimums, but that’ll mean customers can’t necessarily find the item they want when they want it – it’s going to be a HARD road.

AceTracer

Only 45 states have sales tax.

preilly2

My most pleasant experiences at Best Buy have been ordering online and picking up in-store. It’s hassle-free. While there are a lot of nice employees at BB, a small minority do things like aggressively push Geek Squad services even to tech-savvy customers who don’t need them. This leads to annoyance, and annoyance leads to avoidance.

Superabound

I have a better idea: just give me the $10 billion dollars. I mean Best Buy will still go out of business either way, but at least with my plan ill end up with $10 billion dollars.

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